the first \u201crelief\u201d bill has already been passed<\/strong> \u2014 it offers 2 weeks paid sick leave to everyone, and a total of 12 weeks at 2\/3rds pay for parents whose kids are home from school or daycare.<\/p>\nThere are a couple quirks.<\/p>\n
First, it only provides benefits (federal benefits paid through a mechanism of refundable, advanced tax credits to employers) to workers at companies with fewer than 500 employees.\u00a0 This is, of course, being portrayed as a giveaway to Big Business, although, viewed purely through a financial lens, it is a giveaway to small businesses, if one presumes that larger employers will be prevailed upon through social pressure to provide paid leave to their employees regardless of whether they\u2019re covered by a mandate or reimbursed.<\/p>\n
I don\u2019t know what the rationale was, though, and it seems like it would have marginally been improved by phasing out that 500 maximum, or, say, by providing tax credits for all employers, for the first 500 employees (or, since not all will use it, for the first fractional X% of 500 employees).<\/p>\n
The other peculiarity is that the extended benefit, which was originally envisioned to cover a wide variety of situations \u2014 caregiving, extended illness, etc. \u2014 was narrowed down in negotiations, to only childcare, but at the same time, it covers parents of children under 18.\u00a0 Yes, it imagines that a seventeen year old needs a parent\u2019s direct supervision.<\/p>\n
And I\u2019m asking myself if this was intentional, or a drafting error.\u00a0 \u00a0The original bill\u2019s list of reasons for leave was pretty wide \u2014 was it written this way intentionally to give as many people as possible justification for taking leave?\u00a0 Note that the child care tax credit and deduction apply only to children under age 13; your teenager\u2019s keep-them-out-of-trouble summer activities don\u2019t count as child care.<\/p>\n
In reality, I do wonder how people will respond.\u00a0 Will someone who\u2019s trying to manage to keep projects going, find the 2\/3s pay offer (which in one iteration at least was nontaxable, though I\u2019m not looking it up again now) sufficient to cause them to abandon work-at-home efforts?\u00a0 What about blue-collar workers currently cobbling together some childcare arrangements with family or neighbors?\u00a0 In some cases, it\u2019s probably a good thing for them to abandon that \u2014 but others are needed workers.<\/p>\n
Second, it seems to me that one of the first actions ought to be to target the Unemployment Insurance system<\/strong>.\u00a0 Yes, I know, there are issues around logistics (and, again, employees whose job it is to keep the system working, or who have the knowledge to be brought in to expand capacity, ought to be working, not on childcare leave).\u00a0 And the newly-passed bill does target it to some degree, with provisions to waive look-for-work requirements, to send some cash to states to help with the cost, and so on, but we can do more:\u00a0 in particular, as long as the unemployment rate is expected to be super high, we can boost the reimbursement rate from its current 50%, and waive maximums.\u00a0 (Will there be unintended consequences, such as employers looking for drivers for delivery services but unable to hire because the UI system has been too<\/em> effective at meeting needs?\u00a0 I don\u2019t know.\u00a0 What do you think?)<\/p>\nThe other key issue with the UI system, besides maximums\/benefit rates and ability to process claims, is that self-employed people aren\u2019t a part of the system.\u00a0 It seems to me that there is a way to bring them into the system, though.\u00a0 In the long-term, it would require premiums in the same manner as employers pay now, but in the short-term, well, we can\u2019t retroactively collect premiums so you do what you can.\u00a0 But here\u2019s how it could work, on a long-term basis:\u00a0 the government tracks unemployment rates in various sectors (e.g., Uber drivers) or calculates a hypothetical impact of economic downturns, then cuts checks based on the most-recently reported self-employment income, and reported sector in which it\u2019s earned.\u00a0 (Are Door Dash and Uber Eats drivers doing just fine?\u00a0 Are \u201cregular\u201d Uber drivers finding other sorts of driving-related ways to earn income, by becoming Shipt shoppers?\u00a0 A lot of this is unclear now anyway.)<\/p>\n
Or something like that, anyway.<\/p>\n
Which gets us to the big proposals under consideration now to just cut big checks to everyone, repeated as many times as necessary, for stimulus purposes.\u00a0 A half billion.\u00a0 A trillion,\u00a0 Multiple trillions.\u00a0 Just turn on the printing press and don\u2019t stop.<\/p>\n
I\u2019m not a fan.<\/p>\n
I think there are two key issues that are being conflated.<\/p>\n
In the short-term, there\u2019s a tremendous disruption to the economy.\u00a0 Literally.\u00a0 Illinois will be under a \u201cstay-in-place\u201d order starting tonight.\u00a0 No non-essential businesses open.\u00a0 (Very glad we replaced the boys\u2019 shoes last weekend! \u2014 if this continues on for too long, the definition of \u201cessential\u201d shopping will have to change from groceries and drugs to a wider variety of items that are a part of everyday life and can\u2019t just be ordered online.)\u00a0 People whose livelihood depended on other people eating out, traveling, being entertained in public, etc. \u2014 all of that is wiped out.\u00a0 They need immediate relief.<\/p>\n
Once this is over \u2014 whether truly over-over or with a new-normal in which we\u2019ve figured out some combination of treatment (including treatment capacity) and avoidance and schools have reopened but quite possibly with continued ongoing elevated mortality \u2014 then the economy will need traditional stimulus boosts.<\/p>\n
In other words, at this point in time, I don\u2019t think a \u201cstimulus\u201d package as traditionally conceived of as measures to boost demand makes sense.\u00a0 In the prior \u201csend a check\u201d rounds, the idea was that even if someone didn\u2019t need it to remedy financial crisis in their lives, they would spend it on dinner and a movie they would otherwise not have gone to, which would have beneficial effects for the economy down the line.\u00a0 I don\u2019t see that happening right now, because people\u2019s ability to spend money is so tightly constrained.\u00a0 Is there really value for the economy in an otherwise-not-in-need person getting a check which they deposit in the bank with hopes to spend on a vacation next fall?<\/p>\n
Which makes the checks into a form of economic relief, but a very crude one.\u00a0 Should we shrug off the crudeness of it all and say, \u201cspeed of response is more important than fine-tuning\u201d?\u00a0 I don\u2019t know.\u00a0 I fear that we will unleash wholly unpleasant unanticipated effects on the economy if we just turn on the spigots without a meaningful plan in place.<\/p>\n
For high earners, this can be adjusted for with temporary income tax rates for 2020 which have the effect of clawing back the money.\u00a0 But this likewise doesn\u2019t differentiate between those who have coronavirus-related financial struggles and those who don\u2019t, among middle earners.\u00a0 And various iterations of the proposal intend to issue checks based on income in 2018, which also misses the point.<\/p>\n
In the same way, there are squabbles about whether money should go to people who didn\u2019t earn anything at all.\u00a0 I suppose you can make the case that it never hurts to give extra cash to those who have always been poor, regardless of whether they have been directly affected by the pandemic.\u00a0 But what about retirees?\u00a0 What is the point in giving checks to people who simply are not a part of the workforce anyway, as a part of an economic relief policy? I suppose they could be facing additional costs in the short-term, if they now start ordering their groceries rather than going out to the grocery store, but that\u2019s simply not on the same scale.\u00a0 And there is no precedent for boosting retirees\u2019 government benefits because their IRAs have dropped in value.<\/p>\n
So that\u2019s it for now.<\/p>\n
Readers, what do you think?<\/p>\n
\u00a0<\/p>\n
Image:\u00a0 yes, that\u2019s the 100 million mark bill I bought at a German flea market.<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
Just a couple thoughts and an invitation to discussion: First, the first \u201crelief\u201d bill has already been passed \u2014 it offers 2 weeks paid sick leave to everyone, and a total of 12 weeks at 2\/3rds pay for parents whose kids are home from school or daycare. There are a couple quirks. First, it only […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[1418,1425],"class_list":["post-16727","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-coronavirus","tag-stimulus"],"yoast_head":"\n
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<\/p>\n